Tag Archives: distribution

I’ve been thinking a lot about the rumor of Apple’s hardware and content subscription bundle. The idea — whether it actually happens or not — is that they’d create a very expensive subscription of $80/month or so that bundles Apple Music, the new Apple original content, Apple Care, iCloud and a new iPhone every year. This is very much a rumor but very viable avenue posited here and by Matthew Ball at Redef.

This immediately reminds me that for years, Americans paid $100+ per month for another expensive hardware and content bundle: cable TV. I remember the salesman coming to my home and explaining to my parents what cable TV included. It was much more than TV, because before the internet, that box was your only gateway to many things. It was movies, music channels, educational programming for your kids, breaking news, live concerts and the hardware to make it all look beautiful on your only screen.

One way to frame Apple’s rumored hardware/content bundle is that they attract you with their device ecosystem (hardware) and then keep you hooked with their shows and music (content). The phone and its TV and cloud components are already a huge draw for audiences so their content can play the role of keeping users engaged there by making that ecosystem useful on a daily basis.

This got me thinking… maybe content isn’t really an effective audience awareness or acquisition tool AT ALL. Maybe, when all the cards fall, content is just the retention piece of a recurring payment business model and other elements of the bundle are what bring you in the door. This is somewhat reflected by the calculus Amazon did around their original video: it turned out that prestige TV shows like Mozart in the Jungle and Man in the High Castle weren’t such an efficient acquisition tool for Prime.

Check out how this thinking might apply to other businesses. I’ll use this analogy: come for X (acquisition); stay for content (retention).

And the corollary seems to also be true with failed SVODs and streaming services — there’s no acquisition component, just a bunch of originals and licensed content to retain the audience that never came.

There are probably a bunch of examples that prove this thesis wrong, chief of which are Netflix and HBO. (But you could argue that they OVER spend on content, trying to force content into becoming an acquisition tool.)

Even if it’s only a little true, it’s a helpful thought experiment: what if you had to launch a streaming service WITHOUT using content to acquire an audience? You’d have to offer real utility to your users — some other valuable product or service that would attract them to your subscription. Apple already has that part figured out: the phone, the ecosystem. And on the content side of your business, brands like Marvel, leagues like the NFL and celebrities like Oprah wouldn’t be as valuable because you already have a giant draw for new users. If your content is only playing the role of retention, it doesn’t need to hit an attention-grabbing must-see fever-pitch. It can be much less ambitious. You can spend way less than Netflix.

I love how ballsy this would be. Disney is out of Netflix and has announced their plans to make a similar service. And in a guest post on THR, Ben Weiss posits this crazy new move: that Disney could quickly amass a big subscriber base by launching their movies on the service “day-and-date” — that’s the much-feared-by-theaters idea that a movie could be streamed the same day it releases in theaters.

It’s brilliant because it endruns the entire traditional entertainment distribution-windowing business model in favor of the consumer preference of when-I-want-where-I-want. It would definitely grow them a huge base of subscribers. But they’ll never do it.

Disney is already giving up $300 million in revenue by opting out of Netflix.

Theatrical is the majority of their studio entertainment revenue, about 60%… and a move like this wil piss of theaters and threaten that nut. Theaters may refuse to carry the movies or put them in fewer cities. It may even piss off some consumers who still like the theater experience– if their local chain decides not to carry the movies over this move.

If Disney does day-and-date they’re not just threatening the theatrical revenue. They’re endrunning all of their studio ent distribution: pay TV, home entertainment, etc. Why would another provider value their content the same way if it’s already debuted in a streaming window?

And finally, the REAL business of Disney is parks and products — maybe twice the revenue of all of the studio business. What if this slow, gradual windowing model actually helps propel their brands in those venues? It might be a stretch but my instinct is that being in every theater in America is the best billboard ever for a parks attraction or action figure. Better not mess with that.

But, boyyyy, would I love to live in a world where studios made distruptive moves like this. I dare you, Bob!

I LOVE LOVE LOVE this slide from Rich Greenfield at BTIG. His whole presentation is definitely worth the watch but this one graph truly says it all. (And I’m always trying to pull it up online to share in meetings… so I’m also posting it here to make that much easier.)

In the presentation, Rich first shows market caps of the companies below the line — all of our beloved entertainment creators. We see them in print and on every screen and think of them as massive, powerful companies. Then, he layers on the market caps of the “platforms” and distribution companies that sit between those companies and their audiences… and it’s easy to see how those content co’s are dwarfed.

Rich is looking at this through almost exclusively through a lens of financial analysis and market value… which might not tell the WHOLE story, but it paints a pretty dim picture for content creators and brand owners: Content is not king.

Some things worth noticing (many of these points are made by Rich):

None of the entertainment companies below the line — even the juggernaut, Disney — has a meaningful direct-to-consumer platform… they all depend on the companies above the line to reach their audiences

Apple could buy Disney in cash

Google or Apple could buy the entire entertainment industry in cash, except Disney

Every one of the distribution companies above the line have meaningful plans to make their own content that they own completely and perpetually (in other words, they could start to make their own content without depending on the content companies and their brands)

Netflix isn’t even on here but its market cap around $70B, making it bigger than everyone but Disney

Neither is Snap… it’s much smaller than Netflix at $20B (as of this writing), but it still stacks up above Viacom, Discovery and others

The digital-oriented distributors like Facebook, Apple, Google and Amazon have incredible volumes of data and knowledge describing their audiences, which is a huge advantage in content creation

While some of the content companies have partnered with and invested in the FANGS companies, they’ve missed their chance to buy one of them or build their own; Hulu is the only example and they half-heartedly participate in it

Nobody has been able to successfully create a large “direct to consumer” platform with content or brands alone… Netflix had to use DVD rentals, Amazon is using ecommerce, Spotify is using music and UI. In other words, we haven’t seen someone earn lots of subscriptions and ad revenue by only saying “we have ESPN.” It’s always content paired with some other strategy.

What Rich calls the “punchline” is this great thesis: content companies — especially Disney — have to make an acquisition in order to complete their business. What should they buy? Well, all of their options SUCK. Netflix is too expensive. Snap and Twitter don’t come with subscriptions. Pandora or Spotify aren’t video platforms.

That punchline explains many of the plays we see being made around the industry: Twitter continuing to pursue video in an attempt to demonstrate its value as a video platform. Time Warner selling itself to AT&T. Netflix spending billions on original content. NBC investing heavily in Snap. The list goes on…

I’m finished with college. Next semester, I’ll be taking yoga and independent studies. It ought to be a hoot.

But my capstone presentation was about web video distribution. Appropriately, I streamed it online. About 50 people were in and out during the live stream and hopefully they were all thinking, “I can’t wait to hire this kid in May!” Maybe not.

I’m especially proud of a concept I’ve engineered called “segment parsing.” I introduce it in the video — but there’s more to come soon.